CNBC--the Ultimate Contrarian Indicator

The Business Week contrarian indicator is fairly well-known among savvy investors. The theory goes like this: whatever investment is touted on the cover of Business Week, sell it, because by the time the mainstream audience gets wind of it, it is too late, and expectations have reached a manic peak. Likewise, when the cover story of Business Week declares disaster for a certain asset, a bottom is near and it may be time to buy it. In other words, Business Week is a "Wrong-Way Corrigan" indicator--doing the exact opposite of what Business Week urges investors to do is usually enormously profitable, as it sends signals for inflection points.

I believe CNBC has replaced Business Week as the ultimate contrarian indicator, because following the economy and finances has become America's past time. More Americans are becoming literate in financial matters--even when they are learning the wrong things. And CNBC is the flagship business network.

Predictably, CNBC is on permanent bull market mode. From Kudlow to Cramer, and other pundits and journalists in between, they tend to be overly bullish. And their content couldn't have predicted the stock market peak any better. Right before markets worldwide cratered last fall, CNBC was running special programs investigating how hedge fund managers were becoming super wealthy. They also had specials running on Warren Buffett, the world's best long-term investor. Both hedgies and Buffett's Berkshire Hathaway shares have cratered since.

I even saw a business show declaring how Iceland was now one of the wealthiest countries in the nation last year. Today, they are completely bankrupt.

Shorting hedge fund returns, Berkshire Hathaway's shares, and Iceland's currency would have made you a mint last year.

Shouldn't CNBC have run specials on Wall Street fraud, Ponzi schemes, bank insolvency, billion-dollar bonuses when banks were bleeding billions, the auto industry burning cash by the billions, unscrupulous mortgage lenders, over-extended and irresponsible consumers and home borrowers, the impending subprime mortgage crisis, countries defaulting on loan obligations, currencies collapsing, or any number of indicators revealing a wave of cracks which would give way to an avalanche of financial meltdown? Where was the investigative journalism?

The investing public needed these stories before the crisis, not ex post facto. However, to investors with a shrewd eye, the writing should have been on the wall. A modest 2 bedroom, 1 bathroom home is NOT worth $2 million, no matter which neighborhood it resides. And when home prices reached ten times average incomes, something didn't smell right.

But that's spilled milk, the proverbial "looking in the rearview mirror". Let's look forward through the windshield, in order to be constructive.

What should one notice? Government central banks worldwide are printing money ad nauseum, raising fiscal Cain in the process, in an effort to prop up their local economies. This can only debase all foreign currencies in lock step. The only reason why the USDollar remains stronger relative to other foreign currencies is because as bad as our economy is (the US consumer drives over 70% of gross domestic product), other developed and emerging countries are in even deeper water. Many are export-driven, and they are not exporting goods, because the American consumer is tapped out and no longer has any credit. And many foreign banks are more leveraged than their already overly-levered US counterparts.

The biggest reason why the USDollar is stronger than the others (with the exception of the Japanese yen, which has a reserve surplus, i.e., they are savers) is because we still possess the world's reserve currency. However, our USDollar's reserve currency status is slowly eroding, as the Fed continues to print trillions of excess dollars to fund the huge bailouts.

Other sovereign banks and funds are slowly migrating to the realizing that the reign of the USDollar as the dominant currency is coming to an end. They need to hold USDollars in a flight to safety in these shaky markets, but they also realize this is a losing trade as the USDollar is being devalued.

This is one of the reasons why gold is now considered the currency of last resort. Gold has held its value to mankind for centuries, beyond hundreds of empires, nations, wars, economic expansions, economic contractions. Meanwhile, every currency over that span has been devalued--into oblivion eventually.

So when CNBC "pundits" were bashing gold last week, I had to laugh. They claimed owning gold was "unpatriotic"--literally a bet against America. Don't believe them--they are categorically and emphatically wrong.

Owning gold protects citizens from bubbles caused by reckless governments, runaway deficit spending and crippling busts. It's a vote for sound money policy that retains its value from generation to generation. It preserves your purchasing power--and your children's. It enables true economic growth--not false prosperity built on debt quicksand. It rewards successful businesses and ideas, not broken business models subsidized by bureaucracy and favoritism.

If anything, gold is the ONLY patriotic currency available to an increasingly skeptical citizenry.